Real Estate
11 September, 2025
Doubts about grant
IS the first home buyer grant a helping hand or fuel for the fire?
Australia’s housing market has become a battleground, and at the centre of the debate is the first home buyer grant.
Designed with the noble intention of giving young Australians a leg up on the property ladder, the policy’s effectiveness is a subject of fierce and ongoing debate.
While it offers a much needed financial injection for many, critics argue that the grant is not a solution, but a contributing factor to the very problem it seeks to solve.
The core argument against the grant is that it injects more demand into a supply constrained market.
By giving first home buyers more money to spend, it effectively increases their purchasing power.
In a competitive market where properties are already scarce, this extra capital doesn’t necessarily secure a home. Instead, it often serves to inflate prices, pushing the entry point for all buyers even higher. The grant’s value, in essence, is absorbed by the market, with vendors raising their prices to capture the increased spending capacity.
Furthermore, the policy can create an artificial sense of urgency, encouraging buyers to enter the market before they are financially ready. This can lead to buyers taking on more debt than they can comfortably manage, leaving them vulnerable to future interest rate rises and economic shocks.
While for some, the grant may be the crucial difference between owning and renting, a growing number of experts and aspiring homeowners believe it is a flawed policy.
A more sustainable approach would focus on addressing the root cause: the lack of housing supply.
Without an increase in housing stock, grants will continue to act as a temporary fix, fueling an unsustainable cycle of rising prices and affordability challenges for future generations.
- Troy McGuane is a director of Palm House Property.
